More For Your Money - University of Illinois Extension

Pay Off Your Debt Faster

Avoid the Minimum Payment Trap

  • Put more money into paying off your debt and avoid the minimum payment trap.  You can be “trapped” when you pay only the minimum amount due each month. 
  • If it seems like you’ll never get the bill paid off, you’re close to being right.  The minimum payment is usually 2–5% of the balance due.  Paying only this amount stretches repayment over many months or years while interest (often 18%–20% or more) continues to add up.  There are times when your bill can go up, because you haven’t paid the interest cost.


Juanita got an installment loan at the ABC Store to buy a TV that cost $550.  The annual interest rate for her loan is 19.9%.  Her payment is $15 each month. 

Monthly amount paid
Total number of months to repay
Total amount of interest paid
Total amount of debt paid
Minimum payment
4 yr. 9 mo.
Extra payment of $5
3 yr. 2 mo.

If she pays an extra $5 each month or $20 total,

1. How much money will she save in interest? $
2. How much money will she save in her total debt? $
3. How much quicker will she have her total debt paid
(number of years/months)

Do you think it is a good idea for Juanita to pay an extra $5 a month?